The following article is an abridged extract taken from How to Sell Online: The Experts' Guide to Making Your Business More Successful and Profitable Online, by Christer Holloman.
Omnichannel is not just about offline retailers going online, but, as we have seen in the case of Amazon and Made.com, more and more native online retailers are expanding into the real world. Another example is graze.com. This is a case study about how graze leveraged its online retailing experience and business model to compete with traditional fast-moving consumer goods (FMCG) companies in stores.
As part of its rapid growth ambitions, online snack subscription brand graze recognised the scale of the business opportunity presented by omnichannel operations.
This case study looks at how graze defined and launched its retail proposition.
Launched from a bedroom on the same day Lehman Brothers collapsed in 2008, graze was devised to provide office workers with healthy, convenient and exciting alternatives to vending machine snacks, by sending a selection of personalised, portion-controlled snacks by mail. Graze designs, manufactures and brands its own snacks and its mission is to reinvent healthier snacking with pioneering technology.
Food is one of the largest consumer markets in the world, yet is underpenetrated by technology. Adopting a direct-to-consumer subscription model, the consumer signs up to graze and receives four different snacks in a recyclable box as often as they choose. Consumers (called grazers) select the kinds of snacks they would like to eat, from a range of over 120, and can rate the snacks afterwards. Graze sells in both the UK and US markets and competes with traditional FMCG snacks.
Graze has a proven track record for growth, with revenues up 29 % to £68 million in the year ended February 2015.
With the growth of healthy snacking in the UK, graze recognised a gap in the market for wholesome on-the-go impulse options, which would also deliver on excitement and taste. It is estimated that 98% of UK adults snack, with 68% snacking at least once every day. But there was also considerable commercial demand for healthier options.
Big retailers and manufacturers alike were under pressure by the UK Government’s ‘Responsibility Deal’ to reduce salt and sugar in foods and promote healthier alternatives to high sugar and high fat products. As a result, space in store traditionally designated to confectionary – particularly ‘guilt lanes’ at tills – needed to promote fresh or healthier alternatives. These areas represent the highest rate of sale space in stores and retailers looking to boost profitability and expand their on-the-go healthy single-serve snack offerings approached graze directly to develop a range.
Benchmarks for small- to medium-sized snacking brands that have entered the UK retail healthier snacking category were strong, so it offered a significant commercial opportunity. Going omnichannel would also drive profit and the synergies available to graze from being able to utilise the online business resources – marketing, new product development, operations – gave it confidence of driving strong EBITDA quickly.
Graze also felt that an omnichannel presence would address the trust, reach and familiarity challenges that are a traditional problem for online brands, while enabling it to cross-sell both ways – to drive consumers to and from the online subscription business and offlline retail business using promotion codes and awareness emails.’
Unlike most start-up food brands, being a well-established online business meant that there were a number of significant factors that gave Graze a strong launch platform into retail.
First, graze had strong awareness and scale already. Graze was the second largest manufacturer of dried fruit, nuts and seeds in Europe by value, and the number one snacking brand in these products in the UK by value. Graze’s annual marketing spend put it in the same league as household names, such as Lindor and Jacobs, and above big brands Pringles, Doritos and Kettle Chips. Its main competitors in the healthier snacking space were spending far less and the result of this was that its brand awareness statistics were high.
Graze felt that an omnichannel presence would address the trust, reach and familiarity challenges that are a traditional problem for online brands.
Second, a graze retail proposition was in demand. Unusually, graze had been proactively approached by some ‘beacon’ brands and accounts to establish partnerships – such as a major cinema chain, national airline and major grocery and High Street retailers Sainsbury’s and Boots.
Third, graze could utilise the power and minds of an existing organisation, critically in communications, new product development, supply chain, data and technology systems. It had the ability to test products online before introducing in-store and was able to self-finance. Graze’s online business is profitable in both the UK and US markets and was, hence, able to fund the FMCG launch and invest ahead.
To implement the omnichannel expansion, a UK retail director was appointed in December 2014 and, by July 2015, Graze launched an impulse ‘on-the-go’ range of 12 stock keeping units (SKUs) nationally in three strategic accounts.
The resulting proposition was 12 sleeved punnets, but Graze went through a careful process to define this retail proposition. With the online subscription business generating 15,000 customer ratings an hour, and with seven years of product ratings under its belt, Graze had a good idea of what the UK public liked to snack on.
Originally, it considered the idea of launching a narrower range with only one type of product, i.e. six low-calorie recipes. However, graze was aware that consumers enjoy a wide variety of snacks, from sweet to savoury, and felt it was important to reflect that same variety to retail.
With zero marketing or promotional support, graze delivered the highest rate of sale across the store’s total snack business.
A two-month trial of nine test SKUs in Boots, the UK’s leading chemist, from February to April 2015, was critical in honing the proposition and gathering insight on offline customers.
With zero marketing or promotional support, graze delivered the highest rate of sale across the store’s total snack business; with the range representing five out of the top ten revenue selling SKUs for the period it was trialling. In addition, the Boots loyalty Advantage Card data revealed that, during the trial period, almost 50 % of purchases were made by consumers who had not actually bought from the Boots snacking category in the last five months at all, indicating that the new Graze offering was set to drive significant category value.
After the trial, graze decided that launching 12 SKUs would allow it to launch 3 snacks under 4 different umbrella varieties (pillars) to ensure there was a healthier snack for everyone. In this way, each of the 12 SKUs would have a nutritionist-approved badge, such as ‘less than 100 calories’, ‘high in fibre’ or ‘8 g of protein’ – to appeal to the different needs of consumers, and so there would be a reason to feel good about eating each portion-controlled product.
In terms of the preferred form for this range, alternative options were assessed, based on the following criteria: differentiation to its competitors, value perception versus the competition, how well it fits with the existing brand, consumer understanding of packaging/concept, cost/capital expenditure, complexity to implement, and launch date achievable.
Eventually, graze opted for a punnet (as per its online products) and cardboard sleeve (with window). This had some key attributes – first and foremost, as a differentiated format in the category, which was seen as a major brand asset. It enabled visibility of the ingredients and product, whilst also leaving space for brand messaging and communications. By following the same punnet format as for the online product, there was no new manufacturing equipment required or CAPEX concerns and Graze already had the capability to deliver the right volumes. The packaging would also be sustainable, which was important for the Graze ethos.
In terms of the retail snacks in the range, 11 out of the 12 snacks launched were the same or similar products to online. This meant there were synergies with existing supplier relationships and ingredient bases. However, creative product names were tweaked to make sure they were immediately recognisable to a time-poor retail customer.
The run-up to the retail launch prompted the broader graze brand team to agree on and define the global brand positioning ‘good just got exciting’; a message that graze would roll out across geographies on all communications, including its packaging, website, social media platforms, PR, advertising and inserts. Similarly, when designing packaging for retail, graze soon realised it had some core brand assets it was keen to incorporate into the packaging material and creative design.
Going omnichannel forced graze as a business to establish and align on key brand assets, including its recognisable brown logo, brown, textured Kraftpak and clear, plastic punnet. The design team believed they were missing colour identity with the graze brand so, in July 2015, launched the graze brand colour ‘electric moss’ to provide consistency across different channels.
Graze also conducted an Instagram influencer campaign with eight well-known foodie bloggers, with each of the influencers paid to post three images of the graze retail products during launch.
Retailer support was key to landing a successful launch. Each of the launch partners – Sainsbury’s, Boots and WH Smith Travel – enabled the use of on-fixture point of sale, which included ‘new’ posters, ‘new’ barkers and branded display units. Additional support secured included car park advertisements, A-frame posters and secondary-site display units.
Also integral to launch was a solid PR launch plan. Along with appointed consumer and corporate PR agencies, four key tactics were employed. There was an announcement to the trade media to reveal the graze retail range to industry publications one week before launch, followed by a media house tour at two key publishing houses – inviting journalists from the UK’s biggest household titles to come and meet key members of team, learn about the graze story and try the new ‘on-the-go’ range.
Graze also conducted an Instagram influencer campaign with eight well-known foodie bloggers, with each of the influencers paid to post three images of the graze retail products during launch. Their PR agencies met their established press contacts to seed the retail story to them in advance.
Finally, graze made use of its 7 million strong existing customer database. Emails to the graze database at each of the retailer launch dates enabled communications and key messages to be delivered to 7 million engaged or previously engaged Graze consumers for free.
Graze used a number of different measures to monitor success, of which the most valuable was free electronic point of sale (EPOS) data available from key accounts. Second, loyalty card data from Sainsbury’s Nectar Card and Boots Advantage Card revealed an additional layer of detail that flat EPOS would not, and put performance into perspective versus the competition.
Loyalty card data also allowed graze to assess the number of repeat customers in a week versus those trialling it – revealing a strong repurchase rate against its competitors. It could also calculate the average number of units bought per week per customer off promotion, which informs its promotion strategy.
Another benchmark that graze used was in retailer take-up, assessing the percentage of total retailer estate.
Critical success factors and lessons learned
There were a number of critical success factors for graze. This included spicing up its packaging so that it could hold its own on supermarket shelves, whilst still ensuring that it strongly reflected the graze brand that online customers were familiar with – keeping the trade mark Kraftpak box look and feel by importing a Kraft sleeve. Balancing profit with an accessible price for consumers was also vital to a successful proposition.
Looking back on the omnichannel expansion, Emma Heal, graze’s retail director comments, ‘graze has always been a trailblazer and, from being one of the first mail-based providers of snacks to becoming one of the first omnichannel FMCG retailers, the number of direct analogues in the market they have been able to learn from or look to is limited. But something we’ve learnt for ourselves is that we should have launched into retail sooner.
Having spent seven years building a strong online business, going from clicks to bricks took a long time. We’d also be bolder with our launch assumptions. Within two days, we were out of stock on shelves in Central London, and it was lucky our dynamic supply team could react quickly to meet such significant demand – we had to treble our forecast. The beauty of going omnichannel from online is typified in graze’s agility and ability to innovate quickly. Within five months, we’d replaced two SKUs with stronger recipes.
‘Ultimately, you’ve got to be bold and go where your customers want you to – even if that means a significant change in your business model.’
Abridged extract taken from How to Sell Online: The Experts' Guide to Making Your Business More Successful and Profitable Online, by Christer Holloman, published by Pearson priced £14.49